Rite Aid and CVS block Apple Pay and Google Wallet

I’m not sure exactly when it happened, but it was definitely within the last year. The company, which is one of the biggest drug store chains in the country, said it is currently not accepting Apple Pay or the competing Google Wallet.

In a universe where Apple Pay is winning all the headlines along with substantial retailer, financial institution, and consumer buy-in, can the credit union owned-mobile payments technology CUSO CU Wallet survive? According to a recent article from Venture Beat, CVS and Rite Aid have both refused to support the NFC-based mobile payment platforms from the two tech giants. Opinions are mixed but some credit unions strongly believe that the better path for them is CU Wallet, which currently serves 84 credit unions, according to Chris Otey, chief revenue officer at CU Wallet, the mobile technology, payments and security firm in Woodland Hills, Calif. “At present, there is plenty of room for new entrants in the mobile digital services space. There’s much buzz around the launch of Apple Pay, a virtual wallet that allows users to enter their credit card information into their devices or iTunes accounts and then use the devices to securely make purchases online, through an app or in stores.

Take, for instance, CVS and RiteAid: According to MacRumors, both companies shut down the NFC payment terminals they already had installed in their stores that accept contactless credit cards, Apple Pay and Google Wallet. But all those days standing in line, seeing other customers pay with their cards, and watching the baristas shrug it off and keep pouring—and they didn’t even have to make change. I just want to point out as a result of my choice to reject formal religion while still remaining open to the possibility of a theist deity, I got to sleep in last Sunday and then on Monday, I got to feel as though maybe there was an almighty God with complete dominion over all there is and that He deeply approved of the work I was doing here on the mortal plane. Two company spokespeople failed to return numerous calls made on Thursday and Friday, although the company’s customer service department confirmed the ‘tap-and-go’ payment systems were not currently welcome.

This includes, but is not limited to, CU Wallet,” Jim Laffoon, president/CEO of the $8 billion Security Service Federal Credit Union in San Antonio, said. “Apple Pay is causing everyone to elevate their game.” Indeed, the agreed mobile payments universe has undergone an abrupt revolution, according to David Hall, SVP of vendor alliance partnerships at PSCU, the payments services CUSO in St. That wallet system reportedly works with QR codes in an app called CurrenC, with the customer having to scan one while the cashier has to scan another. Because on Monday morning, mere hours after Apple released the iOS 8.1 update that enabled the Apple Pay feature on its new iPhones, I got a phone call from my bank telling me that it was issuing me a new card. It’s also unclear if the retailer has disabled all NFC payment ability on its terminals, thus also rejecting debit and credit cards with built-in NFC chips, or if it is actively identifying and blocking just those payments made with Apple and Google systems.

My understanding is that CurrenC is linked directly to a bank account, not a credit card, and if that’s correct, it’s going to be a non-starter for many. Although you can make a case that Square’s popularity among coffee shops has played a big role, our changing relationship with cash isn’t limited to snooty coffee houses. I hadn’t become the victim of identity theft or anything; their computers noticed that I had engaged in risky behavior over the past year (i.e., “I bought stuff at Home Depot once or twice”) and they didn’t want to take any chances. While Rite Aid isn’t commenting on the move, some have linked the decision to the company’s membership in Merchant Customer Exchange (MCX), a mobile wallet app backed by a consortium of retailers that “lets customers securely save, earn participating merchant loyalty points and pay.” For a mobile payment system to be appealing — and therefore build up a large user base — it needs to either be simpler than worrying if you have your physical credit card or cash with you, or it needs to add some other value.

The timing was so perfect that I’ve been checking the singe marks on my morning toast all week just in case it contained battery specs on the forthcoming Apple Watch. MCX retailers – a list that also includes the likes of Gap, Kmart, Sam’s Club, and others – support such a technology because it could help phase out credit cards. It offers enhanced security not only for payments in physical stores, but those made directly from a merchant app. “Rather than disrupting the payments industry, Apple is working with incumbents, card issuers and networks to bring a familiar payment instrument (card) into the digital world,” notes the Celent report. A recent BankRate survey found that two out of five consumers carry less than $20 in cash. (I currently have $53 in cash on hand, but I’m travelling so that shouldn’t count.) What are we using instead? The technology behind a conventional credit card has been around for more than fifty years: a number is printed on the surface of your card and anybody with eyes can read it or copy it down.

MCX also includes 7-Eleven, Best Buy, Dunkin’ Donuts, Kmart, Walmart, Wendy’s, and other top-tier merchants, all of which have no plans to support Apple Pay as they focus instead on CurrentC. According to banking industry trade group Bank Administration Institute (BAI), Apple has worked magic in steering customer behavior in the past, and the prospect that they can do it again in mobile transacting is a compelling offer for many financial institutions. When paying with Apple Pay, you’re never passing payment information to the point-of-sale system, because it’s based on a tokenized system of transaction data.

Sure I can still swipe the card but we use the card so much — we charge nearly everything to maximize the cash rewards program benefit — that the stripe often goes “bad” long before the card expires. For another, there is a possibility that these retailers could get in trouble for trying to formulate a monopoly of sorts on mobile payments, instead of letting free market competition naturally take its course. This is a similar technology that’s used in applications like gas stations and restaurants where a preauthorization of funds might be required because the final amount of the services are not actually final and held until you add your tip or are finished pumping your gas, explains Ryan Carlson, tech evangelist at The Nerdery, a technology firm. Tokenization allows the point-of-sale to hold the transaction information in memory without storing sensitive card information on their point-of-sale system. This week, The Wall Street Journal noted that iTunes sales have dropped nearly 14 percent year over year, continuing a decline that started some time ago.

The token is only good for a single transaction. “So even if you were able to obtain the token, it would be meaningless and at most usable for a single transaction since Apple Pay creates a new unique token with each transaction,” adds Carlson. Cash and even credit cards aren’t difficult to use, but anyone who’s used Uber and jumped out of the car at the end of the trip without reaching for their wallet or signing a receipt will agree that there are some advantages to going digital.

Whereas I could write two thousand words explaining why Apple Pay transactions are secure and I’d still be skipping over lots of the engineering and criminally oversimplifying the math. And earlier this week, another report said that Apple is attempting to press the music labels for an extensive price cut for Beats Music, slicing the $10 a month subscription fee in half. Being able to lock a payment down to the use of Touch ID and a fingerprint scan, in conjunction with an unique one-time use payment token, means that the loopholes around the physical security of a users payment information has been closed, says Carlson.

In simplest terms, when you configure a credit or debit card to work through Apple Pay on an iPhone 6 or 6 Plus (the only two iPhones that support it in brick-and-mortar stores), the phone’s Passbook app talks to your bank and creates a separate “burner” account number that’s securely associated with this one phone and with this one bank card. Some are hailing this a new era in which digital providers seek to answer the call for greater security and could lead to higher adoption rates than before. While the tool may have launched for a handful of big card issuers, from JPMorgan Chase to American Express, not a single credit union has gone live yet in the system. When scanned, the virus could then feasibly infect the retailer’s payment system and be used to steal customer payment information, a la last year’s Target credit card breach. As soon as you verify your identity and your intent to make a purchase by giving placing a registered fingerprint on your iPhone’s TouchID sensor (or by entering an Apple Pay PIN on the phone), the cash register tells the clerk that payment has been made and approved.

We leapt at the opportunity to make Apple Pay available to our members, who, in general, are quick to embrace new technology.” Other card processors that serve credit unions are following a similar pattern. According to industry data, Android phones outsell iPhones in the U.S. and Apple Pay offers no roadmap for bringing mobile payments to non-iOS phones. Like Google, PayPal holds onto to transaction data.” Apple already has arrangements with 220,000 retail locations that will accept payment on the new iPhones. Right now, most fingerprint ID solutions offer an accuracy rate between 12-20% — not secure enough to protect the privacy mobile users expect or require for financial transactions or for their healthcare information,” says Blasi. Then too, points out Damien Hugoo of Easy Solutions, which provides anti-fraud services to financial institutions. “A big concern is that the authentication mechanisms for validating cards is unclear.

But payment can only be as secure as the authentication, which starts with registering cards to an account, as well as granting access to a particular account.” “Without the proper authentication mechanisms, Apple may have just made it easier for criminals to counterfeit credit cards from the black market. Gil Mermelstein, managing director and head of financial services consulting firm West Monroe Partners’ New York/East Coast office, also raised a doubt: “Can CU Wallet keep up with Apple Pay?” Can a startup CUSO match moves with Apple? One potential benefit is CU Wallet’s technology is provided by the Auburndale, Mass.-based Paydiant Inc., the same firm that is supporting the mobile payment tools for merchant-backed MCX, which involves Wal-Mart and other retail heavyweights.

Paydiant Co-founder Chris Gardner told CU Times that the firm saw few obstacles to building in tokenization, which is a security upgrade baked into Apple Pay. As credit unions weigh Apple Pay versus CU Wallet, some experts believe in the still early days of mobile payments at point of sale, it will not be easy for every institution to decide where it wants to cast its lot. “The worst decision a credit union can make however is to take no action at all,” James Robert Lay, CEO of CU Grow, a digital marketing agency in Pasadena, Texas. We don’t think people will throw away their wallets, but we do believe financial institutions should be thinking about steps to protect themselves and their customers from the new fraud schemes that are sure to emerge.” Setting it up is only slightly a step or two trickier than configuring Apple Pay, but in the end you get almost the exact same experience: use your phone to safely pay for things using an existing card account.

I usually had to place the phone in contact with the terminal (thus rendering the term “contactless payment” ironic), and when additional validation was necessary, I did it with a PIN instead of TouchID. I must also admit that although I trust Google, the answer to the question “Which company is least likely to harvest data about your habits?” is “Apple.” Otherwise? When a payment is made, Google Wallet generates a standard system notification on the phone, whereas Apple Pay zips me back to my iPhone home screen so fast that I was left wondering if I was free to leave with my stuff. It isn’t as convenient as contactless phone payments, and you’re still exposing a printed card containing your credit card number to the visible air, but terminals equipped to use chip cards are more secure than magstrip readers.